The inbox earpods with the newly launched iPhone7 come with a lightning port and an adaptor to the 3.5mm jack. Key benefits include: 1) saving space in the phone: The 3.5mm jack is over 50 years old and doesn’t do much besides carrying an audio signal. It needs its own power amplifier and digital audio converter, which can be built into headphones, so removing the jack makes room for other things, such as a second speaker. iPhone7 has included a lightning-to-3.5mm adapter for a transition period. However, as the 3.5mm jack itself already suffers from some audio degradation and an adapter would make this worse, we think consumers may opt to purchase headphones that use Lightning connector / USB Type C (for Android) directly.

Moving towards digital signal transmission, which enables better sound quality: modern audio formats are basically all in digital; the old 3.5mm jack has a drawback in that its DAC (digital-to-analog converter) alters the audio signal before it reaches a headphone’s speakers, which can result in data loss from a recording.

Digital signal transmission can allow headphones to be “smart” by adding additional features: There is an increasing consumer appetite for additional features in headphones, including health / fitness monitoring and wireless communication. These smart devices have embedded sensors to track heartbeat, pulse, or other biometric data and communicate with smartphones, portable devices, or the cloud, while other premium features such as multiple microphones and Bluetooth are increasingly adopted in smart headphones to facilitate active noise cancellation and data delivery. This trend is most evident in North America and Western Europe.